6 Common Myths about Nonprofits (and how to respond to them)

“Oh, you work for a nonprofit? That’s cool… but isn’t that, like, more of a volunteering thing? They don’t actually pay you, right?”It’s only 10 minutes into this event, and you’re already stuck at the buffet table defending your career path. You take a deep breath— “Actually, I can see why you would think that, but…”If you’re part of the nonprofit field, then you’re probably all too familiar with this scenario. There are a lot of misconceptions out there about what it actually means to work at a nonprofit. So, what do you say to people when they bring up these common myths?

1. Myth #1: Nonprofits don’t make a profit. This is probably the biggest misconception about what it means to be a nonprofit. Despite the name, nonprofits do need to make a profit in order to cover operational costs and employee salaries. Although they may be tax-exempt, nonprofits are still allowed (and encouraged!) to generate revenue. The only caveat is that any revenue generated must be put back into the organization’s mission (so, they can’t distribute dividends to their board members or shareholders).

2. Myth #2: Nonprofits are mainly run by volunteers. While volunteers are certainly valuable members of the nonprofit community, most nonprofits actually have paid staff. A nonprofit is still a business, after all. As such, nonprofits also need accountants, marketers, web designers, and various other jobs that you might be used to seeing in the for-profit sector.

3. Myth #3: Nonprofit work = service work. Although many nonprofits are centered around community service (think: animal shelters and soup kitchens), there are also plenty of other types of nonprofit organizations. These might include advocacy groups, schools, hospitals, or religious institutions such as churches and temples. In fact, 32% of nonprofits in the US are religious institutions; this is still twice as much as the next biggest sector (education at 15.3%).

4. Myth #4: Nonprofits are slow and inefficient. There’s somewhat of a societal stereotype that categorizes nonprofits as slow, inefficient, and unorganized. However, for many organizations, this perception couldn’t be further from the truth! Organizations in any sector can suffer from poor management, but in the nonprofit community, there’s actually a growing trend toward efficiency and accountability. This goes back to the idea that “a nonprofit is a business”; in order to reach organizational goals, nonprofit leaders do make a concerted effort to run their organization as efficiently as possible.

5. Myth #5: Most nonprofits are large in scale and have a lot of resources. In reality, most of the nonprofits in the U.S. are small in scale (<50 people) and are working with limited resources. According to Candid-Guidestar, only 10 percent of organizations registered with the IRS as of July 2015 had revenues of $500,000 or more. While large-scale organizations such as the American Red Cross might have more visibility, the truth is that most nonprofits are working with a much more limited staff and budget.

6. Myth #6: If you start a nonprofit, it will automatically be tax-exempt. This is another pretty common misconception about what it means (and doesn’t mean) to be a nonprofit. Here’s the rundown: if you’ve applied to start a nonprofit with your state (remember that this is done through your Secretary of State’s office) and your application was approved, you’ll get a set of formal documents called your “Articles of Incorporation” in the mail. Articles of Incorporation include information such as the organization’s name, street address, list of board members, and bylaws. At this point, you’re considered an official corporation within your state. You can now apply for an EIN, obtain business licenses, and open a bank account. However, receiving your Articles of Incorporation does not mean that your organization is tax-exempt! In order to gain 501(c)3 tax-exempt status, you must file a different form called the 1023 form. After your organization has filed the 1023 form and been approved, you’ll get another letter: the IRS Determination letter. This is the letter that grants you tax exemption.

Hopefully this clears up some misconceptions you might hear about nonprofit organizations! What are some other common myths you’ve heard?